China A-Shares ETF Rises for Fourth Week as Growth Concern Eases

  • SOE reform boosts optimism ahead of five-year plan meeting
  • Youku rallies in New York on Alibaba's $4.6 billion bid

The biggest U.S. exchange-traded fund tracking mainland Chinese stocks rallied for a fourth week, its longest streak of gains since April, amid speculation that policy makers will accelerate reforms of state-owned companies and introduce more measures to boost growth.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF increased 7.6 percent to $36.19 in the five days through Friday in New York. Youku Tudou Inc. rose to a three-month high, helping push a gauge of American depositary receipts to a third weekly gain, after online retailer Alibaba Group Holding Ltd. offered to buy out the video-streaming website.

The Deutsche A-shares ETF has risen 15 percent since Sept. 18 as traders bet the government will bolster stimulus and riskier assets rallied worldwide amid increasing confidence the Federal Reserve will refrain from raising U.S. interest rates this year. Data released Oct. 13 showed that inflation slowed in China last month, leaving more room to ease monetary policy. Alibaba offered $26.60 a share to buy the 81.7 percent of Youku its doesn’t own in a deal valued at $4.6 billion as the e-commerce company’s billionaire Chairman Jack Ma seeks to stream more video content.

“Alibaba continues to build its entertainment element, which Jack Ma believes is very important to the Alibaba ecosystem,” Henry Guo, who covers Chinese Internet and media as managing director at Summit Research Partners LLC, said by e-mail Friday. “The other potential target is Weibo.”

Weibo Rallies

Weibo Corp., a Chinese-language social media platform, surged 13 percent to $15.57 on Friday, pushing its five-day advance to 16 percent. Alibaba jumped 0.3 percent to $71.99, posting a 4.8 percent weekly gain.

Alibaba’s buyout offer comes after the company invested $1.2 billion to acquire 18.3 percent of Youku’s shares in May 2014. Ownership of the video site would help Ma deliver U.S. films and drama series to more than a third of China’s population as it competes with Baidu Inc. and Tencent Holdings Ltd. for the attentions of Internet users.

Youku, which has never posted a profit since its 2010 initial public offering, soared 22 percent to $24.91 on Friday, the steepest one-day gain since March 2012. Trading volume of 28.6 million shares was more than 16 times the daily average of the past three months. Weibo rallied on more than 5 times it average volume. The company is “a candidate” for likely future acquisition by Alibaba and fits well with its media strategy 86Research said in an e-mailed note. Alibaba already owns 30 percent of Weibo shares, according to an Oct. 2. company filing.

Reform of state-owned enterprises became a catalyst for the market after China announced plans to reorganize the telecommunications industry and promote utility pricing reforms. The government has gone to unprecedented lengths to support growth, increasing stimulus in real estate as well as the auto and casino industries. The country’s leaders are poised to lower their growth target for the next five years at a meeting Oct. 26-29 in Beijing amid challenges from rising debt to excess industrial capacity and bloated state enterprises.

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